When your children were younger, you bought a bigger home to contain all their bric-a-brac. Now, as they have grown older and moved out of the family nest, you and your spouse are left with more space than you need. What will you do with the extra bedrooms?
If you identify with the above, it’s time to downsize, or as HDB calls it, “right-size” your home. To incentivise people to make the transition, the government has introduced the Silver Housing Bonus and other schemes and grants.
Why downsize or “right-size” your home?
If you will only be living with your spouse, a smaller house will be easier to clean and maintain. Rather than a live-in helper, you can save by getting a part-time cleaner or do the chores yourself.
If you stay in a condo, there is also no point in paying for the upkeep of facilities like a clubhouse, pool and tennis court that you seldom use. Downsizing your home helps you save on condo management fees.
And, by right-sizing, you cash in on the appreciated value of the property by liquidating it for retirement. You can either live on the cash or invest to get monthly or annual returns.
Right-sizing options: HDB BTO, resale flat, or condominium?
Now that you’re sold on rightsizing, let’s see your options for a right-sized home.
|2-room Flexi HDB flat||$36,700 (15-year lease)
$62,800 (40-year lease)
|3-room BTO HDB flat||from $140,000 to $308,000|
|3-room resale HDB flat||$260,000 to $349,000|
|2-bedroom condo resale||from $500,000|
Price: If you are looking to free up the most cash, go for the 2-room Flexi HDB flat, which is the cheapest of all the options. If you want condo facilities, consider going for a small condominium.
Size: Having a couple of extra bedrooms gives you flexibility if you are expecting grandchildren or want to leave room for a child living abroad who visits a few weeks a year. However, if you know for sure that you would not need the extra space, a 2-room Flexi HDB flat is sufficient.
Amenities: In your retirement days, you probably won’t need a car as you won’t be commuting around that much. In that case, you would want an area that is well-connected by public transport, with easy access to hospitals, supermarkets, hawker centres, sporting facilities and parks.
When to sell?: Timing and finances matter when you are thinking about when you should sell your property. If you are downsizing to a HDB flat, schemes from the HDB like Deferred Down Payment Scheme or Staggered Down Payment Scheme might help you solve the cashflow problem. See below section on incentives when you buy from HDB.
HDB or condo: If you choose to right-size to a condo, you miss out on HDB grants, but get to enjoy landscaping and condo facilities. When you buy a HDB flat (either a resale or a BTO), you stand to benefit from schemes and grants such as the Silver Housing Bonus, Proximity Housing Grant and Senior Priority Scheme.
HDB Silver Housing Bonus
To encourage older home owners to downsize, the government has introduced the Silver Housing Bonus (SHB), which is a cash bonus of up to $20,000 for downsizing households.
Your household has to meet several criteria, the most important being:
- At least one house owner has to be Singaporean and aged 55 or above
- Gross monthly household income is $12,000 or less
- You will buy a smaller HDB flat (no larger than 3-room) that’s not more expensive than your current home
To get the $20,000, you need to use your net sale proceeds to top up your CPF Retirement Account (RA) and join CPF Life to reach full retirement sum.
Net sale proceeds = Sale price of current flat – Loan on current flat –
Refund to CPF – Resale Levy – Up to $15,000 of ancillary costs – Cash for next flat
How much you need to top up depends on the amount of net sale proceeds you have:
|Net Sale Proceeds||CPF Top-up||Cash Bonus|
|Less than $60,000||All net sale proceeds||$1 for every $3 topped up in the CPF Retirement Account|
|$60,000 to $160,000||$60,000||$20,000|
|More than $160,000||$60,000 + further top-up to reach Full Retirement Sum||$20,000|
It’s important to have enough in your Retirement Account as it will determine how much payout you get from CPF Life.
So, selling your HDB flat, condo or house by rightsizing helps you to top up your Retirement Account. Once you fulfill these conditions, you stand to get the SHB, an extra $20,000 that you can use it to further top up your Retirement Account or take away as cash.
If instead of topping up your CPF retirement account, you choose take the windfall from the sale of your home to buy a new ride or go on a holiday, you won’t get the Silver Housing Bonus of $20,000. Read more about the Silver Housing Bonus on the MND website.
No idea what CPF Retirement Account or CPF Life is? Read CPF Retirement Sum – How Does It Work and How Much Do You Need? and Retirement Planning for Millennials.
Silver Support Scheme ($300 to $750)
For the elderly in financial need, you can get cash payouts from Silver Support Scheme depending on the type of your housing. Here’s another reason to right-size to a smaller flat because the more modest your home, the more cash you’ll be given:
|Live in HDB flat type||Payout per quarter|
|1-room and 2-room||$750|
This is only for Singaporeans 65 and above who meet certain criteria, the most important of which are:
- Have no more than $70,000 in your CPF at age 55.
- If self-employed, earned no more than $22,800 a year when you were 45 to 54.
- Live in a 5-room HDB flat or smaller.
- Can’t own or be married to someone who owns a 5-room HDB flat or larger, a private property, or multiple properties.
- Live in a household with a monthly income per person of not more than $1,100.
View full criteria of the Silver Support Scheme on MOM’s website.
GST Voucher – U-Save (from $60 to $100 from 2019)
Depending on the size of your flat, you can get quarterly rebates from GST Voucher – U-Save to help you pay your utilities bills. Again, the smaller the flat, the more the rebate. U-Save is part of the permanent GST Voucher scheme.
|Type of Flat||Oct 2018||From 2019|
|1- and 2-room||$95||$100|
|Executive / Multi-generational||$55||$60|
Incentives when you right-size by buying a flat from HDB
If you downsize to a HDB, there are various schemes and grants that you can benefit from to help your transition.
Proximity Housing Grant (PHG): If you buy a resale flat within 4 kilometres of your child, parents or parents-in-law, you get $20,000. If you get them to live with you in your new place, you get an additional $30,000.
Deferred Down Payment Scheme (DDS): If you’re 55 and above, and hope to right-size to a BTO 2-room Flexi or 3-room flat by buying from HDB, you can defer down payment and not pay when you sign the lease. Instead, you can wait until key collection to pay the 5% to 10% down payment.
This buys you some time so you can sell your current home and use that money to finance your new BTO. You don’t benefit from this if you’re buying from the open market.
Staggered Downpayment Scheme (SDS): If you buy a 2- or 3-room flat in a non-mature estate under the HDB sales launch from HDB, you only need pay half the required down payment for your new flat. The other half can be paid when you collect the keys.
Take note that you can’t use both the Deferred Down Payment Scheme and the Staggered Downpayment Scheme together. It’s one or the other.
Temporary Loan Scheme (TLS): Suppose you need to buy a smaller flat while you’re trying to sell your current one but you don’t have the money to pay for your right-sized flat just yet. Instead of taking out a long-term mortgage, you can apply for the Temporary Loan Scheme (TLS) which you pay back once you’ve sold your flat. This helps you with cashflow when you right-size.
How to downsize/right-size to a HDB BTO flat
A BTO flat is the cheapest option when it comes to right-sizing. Getting a 2-room Flexi flat or 3-room BTO also entitles you to more benefits and subsidies.
A 2-room Flexi flat is great for the elderly because its lease is flexible, unlike regular new flats which come with a standard 99-year lease. You opt for leases between 15 and 45 years (in 5-year increments) as long as it covers you and your partner to at least age 95.
Seniors also get priority balloting when it comes to choosing a 2-room Flexi BTO (47 sqm) within 4km radius to their children, parents or parents-in-law (if they’re still around).
You are allowed to buy a 2-room Flexi flat on a short lease if:
- You’re 55 and older
- Your average gross monthly household income is not more than $12,000
- You must sell any private property you or the hubs owns here or abroad within 6 months of getting the 2-room Flexi flat
There are some reasons why a BTO may not be suitable for you:
Locations are limited: The November 2018 HDB BTO release were only in Tengah, Sembawang, Yishun, Sengkang and Tampines, which is a pretty limited selection if you want to stay near your children. May 2019 HDB BTO release had Boon Keng, Tengah and Woodlands though.
Subjected to a balloting process: You have to place a ballot with other young couples who will be gunning for a BTO as well, which does not guarantee the purchase of the flat. Read more about how to apply for a BTO.
Not for private property owners: If you currently own private property, you can only purchase a 30 months (2.5 years!) after the sale of your current private property. You also won’t be eligible if you own private property overseas.
Limited to first and second time BTO owners: You won’t be able to buy a BTO if you have gotten a BTO, DBSS flat, EC or used the CPF Housing Grant more than 2 times.
For a wider selection with less hassle and waiting time, you can purchase a HDB resale flat from the open market or get another private apartment.
How to right-size to a resale HDB
If you can’t buy get a BTO or feel you’re too old to wait for luck to give you a home, you can purchase a resale flat from HDB (HDB Resale Portal) or the open market via an agent.
Agent or DIY: If you use an agent service, he or she can help you to scout a property that is suitable for your needs. If you DIY, you will have to sieve through Classified Ads or property portals like STProperty, iProperty.com.sg or 99.co yourself. You might even look up Carousell.
Price of resale flat: Check if you are being quoted a fair price for the resale HDB flat.
Lease period: As you will be right-sizing to a flat for old age, make sure that the length of the lease will not run out before your time.
Ethnic integration policy and Singapore permanent resident quota: Does the resale flat that you want meet the ethnic and PR mix?
How to right-size to a resale condo
Another option is to right-size to a small condo, so you still get to enjoy higher security and condo facilities. Consider the below factors:
Conservancy charges: Apart from monthly maintenance fees to your condo’s property management, take note that you also have to pay conservancy charges, which range from $300 to $1000 per month.
Changes to the URA master plan: You might want to avoid areas where there will be major constructions around the area as you don’t want to be moving too much in old age.
History of condo management: Check if there have been problems with the management committee or if there are en bloc possibilities. You may like the idea of another windfall, but that means that you have to uproot and move again.
Retirement kampungs in Singapore
If you’re looking to invest in a retirement home, you may have heard of 2-room studio apartments that have elderly-friendly facilities such as anti-slip tiles, emergency alarm cords, and grab bars in toilets. They even come with dedicated civil defence station in each development. Some examples of these flats include Golden Pines at Tampines, Golden Willows at Jurong West and Golden Clover at Toa Payoh.
But residents who have moved in report to have some regrets over rushing to move into such units and ending up with much smaller flat. According to a paper by the LKY School of Public Policy, segregating old people to a “monotonic social group bred a sense of morbidity and despair”.
The good thing about these retirement villages, though, is that you will be surrounded by people who will look out for you and can get to enjoy adjoining amenities and built-in features that are elderly friendly. Award-winning retirement kampung at Admiralty has wide public communal spaces, a dedicated medical centre and a childcare centre.
Ultimately, whether to downsize to a retirement kampung depends on your lifestyle. If you have large groups of family and friends supporting you already, you probably won’t need to move just for the community.
Remember that there is no need to rush to join the “Golden” establishments, or any upcoming retirement kampungs. If you are currently living in a three-storey house, suddenly downsizing into a 2-room flat will require serious adjustments and may result in you feeling a sense of loss. It’s also important to exercise shrewd diligence when you’re downsizing and not ignore trends in the property market.
Now that you’ve right-sized your home, what should you do with the proceeds?
With the new proceeds, you can either top up your retirement account or pay for your new home in full. By paying in full, neither of you will be in debt if someone passes away. While you live on it prudently, it’s also wise invest in short-term instruments like bonds or trading stocks on the SGX. Read up on how to open a CDP account and 5 Ways to Invest in Stocks and Bonds before you invest.
Will you be downsizing your home? Do you find that the Silver Housing Bonus is a good incentive? Tell us in the comments below.
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